A glaring disparity in the struggle for nat gas
If we just got uniformity of taxation, we would speed up a shift from dirty diesel to cleaner-burning LNG.
Do we want Congress to be involved in energy? Isn't that what caused us to have this horrendous ethanol burden? While the fuel placated farmers, it regularly uses a gigantic amount of water -- a precious resource -- to make an expensive fuel that few people prefer.
Isn't that what got us down the Solyndra path of bogus solar investment? Isn't that what has nagged us in our endless, expensive futile attempts to create a clean coal utility, even as the engineers behind it would tell you it can't be done in a practical way?
So why would anyone want the government involved in the possibility of helping along liquefied natural gas as a transportation fuel?
Let's put aside that LNG is cleaner than diesel, the fuel it should displace, when it comes to carbon dioxide, nitrogen oxide and sulfur dioxide. Let's forget that it is a domestic fuel that could make the U.S. less dependent on regimes that we have to defend or prop up in order to be sure our energy sources aren't compromised. I am even willing to table the notion that hundreds of thousands of the unemployed could be hired into well-paying jobs in order to build out the infrastructure we lack here.
But it makes no sense whatsoever to be hands off some other issues, and the biggest one is the federal taxation of liquefied natural gas. We know that, because of our glut of natural gas, one that could last for decades, natural gas engines have a considerable price advantage over engines that use dirty imported diesel.
Still, because of a fanciful anomaly in the way the federal highway excise tax is calculated, the federal government has put liquefied natural gas at a competitive disadvantage vs. diesel.
The federal highway excise tax right now, on both diesel and LNG, is $0.243 per gallon. But gallons are not equal, because LNG provides less energy per gallon, which is what really matters. You need 1.7 gallons of LNG to produce the same energy as one gallon of diesel fuel. Yet the tax is on the volume of the fuel, not its energy. That means LNG is taxed at 170% of diesel, if you look at an apples-to-apples energy comparison.
As explained by the trade group Natural Gas Vehicles for America, if a diesel truck travels 100,000 miles per year and gets 5 miles per gallon, it guzzles 20,000 gallons of diesel fuel. A similar LNG truck would require 34,000 gallons of LNG to go the same distance, at a cost of $3,402 per year in taxes. That's a pretty big disincentive.
Before you start thinking that I believe liquefied natural gas deserves special pleading, you should know that compressed natural gas -- a different technology but from the same feedstock -- is priced on exactly the energy equivalent basis that gasoline is (though CNG likely won't be used as a long-haul fuel). Why shouldn't LNG be taxed like CNG? To make matters worse, many states take after the feds and used the same differential, and tax LNG, not CNG, on a volume and not energy content.
To me, if we just got uniformity of taxation -- something that private industry cannot do -- we would speed up what should be a policy imperative: weaning us off dirty, imported diesel fuel and on to cleaner-burning LNG. But without an energy policy, it's just not going to happen.
To get this to change, President Barack Obama has to get engaged in the push. By merely calling for uniform taxation, he would help eliminate diesel, the true enemy of clean skies that he talks so much about. But what's he doing about this obvious disparity? The same thing everyone else in the capital is doing.
Nothing.
Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust.
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I would only bet the Government, will work on the taxing or taxable process, long before taking a look at, or care about EPA Standards or the Efficiency of fuel...?
If some say it burns cleaner or is safer, then a 5 year study will be done by the EPA to justify their jobs,
And then they will step forward with a 5000 page report....Saying, "Yes it does,but..."
If everything is OK why does the number of people on food stamps keep going up?
Is everything really not OK? Is it just real easy to get food stamps and people want free food? Maybe there is just a lot of surplus food... is that it?
UE is down, housing rebounding,retail sector bounced back, consumer spending up.... You would think the people on food stamps would diminish. Maybe food stamps are a trailing indicator of prosperity?
Thank you Jim for the spot-on article! You presented a very relevant issue in a perfect context. As a natural gas vehicle consultant who works with fleets in the Northeast US who replace their diesel heavy-duty trucks w/ those powered by LNG, I can vouch for the pain felt by fleet owners with this excise tax penalty from the IRS. Unfortunately, many states also unequally tax LNG vehicle fuel on a volumetric, instead of the more accurate, energy content basis. With the more-recent plethora of domestic natural gas availability and advancements in NGV engine and fuel system availability, now is the time to remedy this disparity -- a disparity that works counter to other active incentives to spur the adoption of the LNG as a replacement for diesel motor vehicle fuel. The American Taxpayer Relief Act, passed in Jan., 2013, includes a federal excise tax credit on the use of LNG as a vehicle fuel however that only lasts through year end. Congress needs to smooth out this issue and as you suggest, tax LNG on the energy equivalent of diesel, the fuel it displaces. Penalizing the innovative, early-adopters of this cleaner-burning vehicle fuel is bad policy. -- D. Fox Consulting, LLC.
Ferris Wheel - why all the hate? What is your reference for disputing the 5 mpg as claimed by the 'trade group Natural Gas Vehicles for America'?
If you do a quick fact check by searching 'diesel semi-truck mileage per gallon', you will find that even the newest engines have a top rating of 9 mpg and the older ones average around 5 - 6 mpg.
Thanks CGT1....I was selling some positions, when the DOW hit an "all time high" about 10a. or so...
Maybe the "intraday" will be the high for today's, Dog and Pony show...
But I'm not a manipulator or a scumbag, just trying to buy low and selling at a high.
It was gone, at a penny below the high, and now it's down .35 cents, I just paid for the trade.
Keep up the "good work" CGT, some of us are watching and trading..
hi all this is my first comment, but here we go the path that kmp,paa psx,vlo in compliance is mind boggling but i think based on the news that the us needs two things better tax codes and a export policy to compete in the global market and last but least clear policy in energy will lead to many jobs
by the way still waiting on the EPA, dept of energy, dept of natural resources, on waterless drilling tech report?????????????????????????????????????????????????????????????????????????
People have figured out better ways to work the system...Or BILK it....DLH.
Just about every Senior could get on them,,unless they have other income or assets besides SS.
I don't think a home or vechicle is counted.?? maybe ?
I told Miss Lilly, that we might qualify if they didn't dig too deep....
But she flatly refused to be any part of that....She has Scruples and Morals..
Myself on the other hand..??
I wonder if Mirage Guy has ever got assistance or foodstamps...Sounds like he might have ??
Comparisons of energy sources for transportation should at least start out by looking at payload per
mile per required energy units. Other factors can and do enter in, e.g. power requirements which is
energy requirements per unit time is usally an important factor. Refueling requirements which can depend on maximum range capability, as well as fuel density limits which can be in either energy per
unit volume or energy per unit mass can also be important. And last but not least is usually the total cost per delivered payload unit. All of this should be determined by good system analysis.
I would think anyone who has a sister/brother that owns a Limo Service wouldn't have be hitchiking..
But then again they may have been driving a limo...
Still need to know whether Pat is a Guy or a Gal..??
Seems he/she used be the hot Arizona Blond chick,,just sayin', that means FEMALE right ??
This has been driving me nuts...Instead of driving Miss Daisy..
Inquring minds have to know..
"The Needs of the Many.."
Ernie...You just have to "glide by" some of the hater comments...Don't let it get you down..
Ferris, usually isn't too bad..But maybe he did put a match to Diesel and LNG for a test, like a Lab rat;
Maybe he's still pissed about that ??
His hair will grow back in a few months..Probably.?
I kinda think diesel MPG is overated, and usually tested under ideal conditions...
Never going over the Rockies in the Winter, for sure..
And it seems to have been this way for Decades...?
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